Inheriting the Start-Up Gene

By Daniel McGinn | Small Business

It's been shown that the children of entrepreneurs are more likely to start businesses themselves, but there may be more to the equation.

It's been shown that children of entrepreneurs are more likely to start businesses themselves, but there may be more to the equation. A new study suggests that the influence of an entrepreneurial parent is highly correlated with the age of the children, and that the success or failure of a parent's business plays a role, too.

The Findings

Since 1990, several studies have firmly established that children of entrepreneurs are two to three times more likely to launch a company than are kids of traditional salary earners. But researchers continue to try to understand why. A recent study conducted by professors at two business schools-Edward Mungai, dean of the Strathmore Business School in Nairobi, Kenya, and S. Ramakrishna Velamuri, an associate professor of entrepreneurship at the China Europe International Business School in Shanghai-may shed some light on the subject. The researchers found that kids who were young adults (18 to 21) when their parents ran companies seemed to be most influenced by Mom's or Dad's choice of career path. The research also confirms that parents who fail in a business seem to act as "negative role models," making their kids significantly less likely to launch a company. But this was mainly true for older kids who had seen a parent's business crumble. Younger children were not as affected.

The Methodology

The researchers plumbed the Panel Study of Income Dynamics, a longitudinal data set run by the University of Michigan that has followed nearly 8,000 representative U.S. families since 1968. First, they identified people who left traditional jobs to become self-employed. Using the family income data, the researchers determined how the businesses fared in subsequent years. They looked for signs of a start-up gone bad: founders who were later unemployed, left the business after suffering losses, or reentered the traditional work force at a lower wage. Next, they looked at the kids of these entrepreneurs and determined how old they were when their parents ran companies. Researchers then examined whether the children ultimately became self-employed themselves. (Because detailed data was available about heads of households, who were mostly male, the study looked at only male children.)

The Takeaway

Business failures are traumatic, and it's no surprise that kids who watch their parents go through one might conclude that a more stable job is the way to go. The more important finding relates to age. If 18- to 21-year-olds are the most impressionable when it comes to their parents' businesses, there's reason to believe that age group would be highly receptive to entrepreneurial education, say the study's authors. Mungai and Velamuri propose that universities offer these programs to undergraduate students of all disciplines.